Question on Sheriff's Sale Foreclosure Process (NJ)

[sgopal2]

What is the name of your state? NJ

Hello all,

I've got a question related to purchasing a property at a Sheriff's auction. I'm not an attorney and don't know much about the foreclosure process. My wife and I are interested in bidding on an auction next week on a property. We have have hired an attorney to review everything for us and give us an opinion, but I'm not sure I really trust the advice he has given so far. Here are some relevant details:

• Property located in New Jersey, single family home, built in 2003. If we win the auction, we intend live in the home as a primary residence.
• Existing owners declared bankruptcy (Ch 7) in June 2007. Lis Pendens filed July 2007.
• Sheriff's sale scheduled for next week (12/4/07).
• Title search revealed a total of 5 mortgages (4 different lenders) existing on property, totaling $820K. Comparable homes in the neighborhood have sold for about $825 recently.
• Muncipality states property taxes, sewer and water payments up to date
• Writ of execution names first mortgage holder (US Bank) as plaintiff, and names the homeowners along with 3 successors as defendants.
• Exterior inspection of home reveals no major issues, apart from some peeling paint and bags of garbage left inside. The owners moved out 2 months ago. We spoke to the neighbor next door and he doesn't know of any major issues/faults with the house construction.

Here are my specific questions:

1) When we bid at the auction - what exactly are we bidding on? To pay back the primary mortgage holder (US Bank), or are we bidding on the deed to the property?
2) If we win the auction, does that mean the other junior liens are extinguished? Or can the other 3 lienholders eventually come after us for payment?
3) Are there any type of liens that would survive the Sheriff's sale? If so how do we find out about these ahead of time?
4) Is there anyway to find out if the IRS has a lien on the property (the title company did not mention anything in the report)?
5) Can we still get title insurance on the property? If not will we have any problems when it comes down to re-selling this home later on the down the line.

[sgopal2]

One other thing:

After reviewing the background check document more closely, it appears that the current owner has either a Tax lien or small claims judgment against him in the amount of $19K.

[seniorjudge]

Get a title report from a title company BEFORE you do anything else; it will tell you what stuff is on there and (at least it should) tell you what will survive the sale and what will not.

A couple of general rules:

If the lien is younger (junior) than the lien being foreclosed (senior), then junior will die.

Also, the feds always get their money. Period. End of story. Even if.

[fairisfair]

Originally Posted by seniorjudge

Get a title report from a title company BEFORE you do anything else; it will tell you what stuff is on there and (at least it should) tell you what will survive the sale and what will not.

A couple of general rules:

If the lien is younger (junior) than the lien being foreclosed (senior), then junior will die.

Also, the feds always get their money. Period. End of story. Even if.

Heck if that isn't doing somebody's homework, I don't know what is

[LindaP777]

I can tell you how it's done here in Ohio, but you'll need to do a little research to see if it's correct in NJ.
Here, every foreclosure is a court case. I can actually have the file pulled and see all the mortgages & lien holders listed against the property in the case. If one of them has been overlooked, it could actually stay with the property (and you buy it with that lein on the property).
Here in Ohio, if there is a "defect in the proceedings", the sale may be vacated within 30 days after the sale. So after I "win" an auction, I immediately have a title search done (by professionals - this is not a do-it-yourself project). If any of the mortgage/lien holders were not listed in the proceedings, I have the sale vacated. Check with your sheriff's office in regard to their policy.
You do buy the property "as is". If you note defects in the property after the sale, you are SOL. So buyer beware when it comes to sheriff's sales.
Also, always buy owners title insurance, especially on a foreclosure. A lot of things could pop up and you'll want to make sure you're covered. (This is the only business I can think of where you buy insurance to insure the professionals you paid to do a job did it correctly. It's a wonder doctors haven't come up with "surgery insurance" yet.)

[sgopal2]

Hi All - Thanks for the helpful responses.

Just a point of clarification. When I said above the title search revealed 5 mortgages, this was not done by me. We hired a title company, and they issued us a formal "title report".

There was a court proceeding before the Sheriff's sale was ordered. In the proceeding, I noticed that only 3 of the 4 lienholders were listed on the complaint. So I guess this means that 1 of the lienholders were overlooked. I will call the lienholder to find out the amount to see if its still worthwhile to buy the house.

Also does anyone have any tips on the bidding process at the auction? We have a number in mind as our max bid, how do we avoid a bidding war by the professionals who show up at these things?

[LindaP777]

Originally Posted by sgopal2

Also does anyone have any tips on the bidding process at the auction? We have a number in mind as our max bid, how do we avoid a bidding war by the professionals who show up at these things?

No way to avoid a bidding war, that's part of the process. Stick to your max bid. Be prepared to be disappointed. More the likely, the bank will keep the bidding going until they hit the total amount owed. Occasionally, you'll have a second or third mortgage blow it off, but most mortage companies want to try to get their money. This summer I bought a house where the second mortgage holder didn't show (so, didn't bid). I bought the house for $96,200 and sold it 2 months later for $137,000. (I only had to put $2500 into it, so I did real well. BTW - it was the second time I bought that house!)

The only thing we (investors) have been able to do to avoid a bidding war is get together with the other investors prior to the sale and compare notes. You write down you highest number, they write down theirs. Whoever is willing to pay the most, it's agreed the other investors won't bid against them and run the bidding up. Sometimes you get the opportunity, sometimes you let someone else have the opportunity. BUT, it's a gentleman's agreement and you have to know the investors, and that still doesn't stop the average Joe from bidding against you.

[alex468]

In other words, be aware that there will most likely be a significant group of property investors at the Sheriff's sale who always collude with each other and never get caught doing it even if state law indicates that sales involving collusion are invalid. As a group, they have much deeper pockets than individual investors, and each individual investor most likely has deeper pockets than you as an "average Joe" looking to buy a home in which to live. If they think you might be a new investor who is trying to infringe on their territory, they may have a "gentleman's agreement" to artificially raise the price by overbidding in order to force you out of business if you don't join them. Remember, you are the unknown quantity who may be the great monkey-wrench in their schemes, and (like other groups of corrupt con-artists) they maintain the fantasy that what they are doing by protecting each other at the expense of the general public is somehow gentlemanly.

[LindaP777]

Originally Posted by alex468

In other words, be aware that there will most likely be a significant group of property investors at the Sheriff's sale who always collude with each other and never get caught doing it even if state law indicates that sales involving collusion are invalid. As a group, they have much deeper pockets than individual investors, and each individual investor most likely has deeper pockets than you as an "average Joe" looking to buy a home in which to live. If they think you might be a new investor who is trying to infringe on their territory, they may have a "gentleman's agreement" to artificially raise the price by overbidding in order to force you out of business if you don't join them. Remember, you are the unknown quantity who may be the great monkey-wrench in their schemes, and (like other groups of corrupt con-artists) they maintain the fantasy that what they are doing by protecting each other at the expense of the general public is somehow gentlemanly.

Or, you might just be full of crap! Please site how comparing notes is collusion? Please site that Ohio state law for us.
Investors are looking for good deals. Most investors I know are not willing to pay as much for a property as an owner occupant. "Artificially raise the price by overbidding" is bullsh*t. What investor would cut off his nose just to keep a buyer out? We don't protect each other and welcome other investors and even owner occupants. We help anyone who asks. As far as financing, now that non-conventional loans are nearly a thing of the past, owner occupants definitely have an advantage over investors.
I repeat, alex, you are full of crap! Keep your yap shut unless you know what you're talking about. People come here for help, not ramblings of a wanna be investor.

[alex468]

I am simply letting the person who asked the question know what to expect. I'm not a lawyer, and I'm also not a wanna be investor. A regular group of investors "comparing notes" so it's "agreed the other investors won't bid against them" seems like the very definition of bidding collusion to me. And if you think a bidding syndicate has never jacked a price up to punish a competing party, then you're being rather naive.

However, I am using a common sense dictionary-like sense of the words "collusion" and "syndicate" that an ethical person interested in the greater societal good would have. You are probably right that I am full of crap and lawyers for members of your "group" have reassured you that what you are doing is fine. Ultimately, it is dependent on the ability of the other interested parties to find out what you're doing and attempt to invalidate the sales. It's also up to the American people to strengthen the laws about collusion at Sheriff's sales and tax sales and to enforce the laws that are already in place. Of course, your own conscience may also play a role, but I doubt it. And by the way, the person asking the question lives in New Jersey, not Ohio.

[LindaP777]

Originally Posted by alex468

I am simply letting the person who asked the question know what to expect.

But that's the point, what your saying isn't accurate and is not even helpful.

Originally Posted by alex468

Instate law indicates that sales involving collusion are invalid.

Put up or shut up. You accused me of doing something illegal, so now show me the Ohio state law, hot shot. If you can't then as I said before keep your uninformed yap shut. We don't want to hear your "opinion".

Originally Posted by LindaP777

I can tell you how it's done here in Ohio, but you'll need to do a little research to see if it's correct in NJ.

Anyone who can read can see I already informed the OP I was from Ohio.

[HomeGuru]

This is nice. Where's alex?

[glennair]

Me thinks LindaP777 needs tranquilizer.

[alex468]

Please see Ohio State Law Sec. 1309.47. (D)(1) available at [url]http://www.legislature.state.oh.us/bills.cfm?ID=123_HB_292[/url] .

"(D)When collateral is disposed of by a secured party after default, the disposition transfers to a purchaser for value all of the debtor's rights in the collateral, and discharges the security interest under which it is made and any security interest or lien subordinate thereto to it. The purchaser takes free of all such rights and interests even though the secured party fails to comply with the requirements of sections 1309.44 to 1309.50 of the Revised Code or of any judicial proceedings:

(1) In the case of a public sale, if the purchaser has no knowledge of any defects in the sale and if the purchaser does not buy in collusion with the secured party, other bidders, or the person conducting the sale"

Getting together with a group other bidders to compare intended bids and not bid against each other would seem to the average person to be the purchaser buying in collusion with other bidders at a public sale. New Jersey most likely has a similar law, and it is most likely similarly unenforced. The original poster is well-served, I think, by this discussion. It is important to understand the lengths that real estate investors will go through to convince themselves and others that they are acting in a legal and ethical manner when they are not.

Of course, I am not a lawyer or a real estate investor. I'm just an American looking in at an industry that looks increasingly entitled and self-deluded every year. I wouldn't worry about it too much, though. I'm sure you'll continue to get away with it.

I live in Massachusetts.

I've put up. Now I'm shutting up.

[glennair]

LindaP777 rude.

Alex468 very smart.